Outlook and Targets

Please read our caution about Forward-Looking Statements in the Conditions of Use when using this information.

Future Perspectives

(published on November 3, 2020 in the Quarterly Statement Third Quarter 2020)

Corporate Outlook
Based on the business development described in this Quarterly Statement and our internal planning, we confirm the revised currency-adjusted Group outlook for 2020 that we issued in August of this year.

For 2020, we expect to post sales of €43 billion to €44 billion on a currency-adjusted basis. This corresponds to an increase of 0 to 1% on a currency- and portfolio-adjusted basis. We are targeting an increase in the EBITDA margin before special items to around 28% on a currency-adjusted basis. Based on the sales target, this would correspond to EBITDA before special items of around €12.1 billion on a currency-adjusted basis. We anticipate raising core earnings per share to between €6.70 and €6.90 on a currency-adjusted basis.

However, due to revised growth assumptions, we now expect to post currency- and portfolio-adjusted sales growth of 1% (previously: 2%) at Crop Science and 5% (previously: 4%) at Consumer Health.

Corporate Outlook
The forecast published in February 2020 did not take into account the effects of the COVID-19 pandemic, the financial impact of which remains difficult to predict. We are therefore adjusting the forecast as follows, based on the business development in the first half of the year and assumptions for the rest of the year that involve uncertainties:

We anticipate that business at Pharmaceuticals and Consumer Health will normalize overall, although the growth originally envisaged for Pharmaceuticals is not expected to be achieved. In the Crop Science Division we foresee a restrained start in the fourth quarter to the 2021 North America season as a result of pandemic-related reduced demand for biofuel, feed and fiber driving an expected reduction in 2021 planted acres, as well as from ongoing soy market dynamics.

This results in the following changes for the Bayer Group’s financial indicators. We are now targeting currency-adjusted growth in sales to €43 billion to €44 billion (previously €44 billion to €45 billion). This
corresponds to an increase of 0 to 1% (previously: increase of about 3% to 4%) on a currency- and portfolio-adjusted basis. We continue to target an increase in the EBITDA margin before special items to
around 28% on a currency-adjusted basis. Based on the sales target, this would correspond to EBITDA before special items of around €12.1 billion (previously: €12.3 billion to €12.6 billion) on a currency-adjusted basis. We anticipate raising core earnings per share to between €6.70 and €6.90 (previously: increase to between €7.00 and €7.20) on a currency-adjusted basis.

The adjusted forecasts for the divisions along with other indicators are contained in the following table:

Forecast for 2020

Initial forecast 2020 from Annual Report Adjusted forecast 2020
€ billion Fx & p adj. Change (%) € billion

Fx & p adj. Change (%)

Sales1 44 to 45
+3 to 4
43 to 440 to +1
Crop Science ~+4 ~+2

Pharmaceuticals

+3 to 4 ~-1

Consumer Health

+2 to 3 ~+4
Margin (%) Margin (%)
EBITDA before special items1
~28 ~28
Crop Science ~26 ~25

Pharmaceuticals

~33 34 to 35

Consumer Health

22 to 23 22 to 23
Financial result (core)2 ~-1.5 ~-1.6
Tax rate (core)3 ~23% ~23%
Free cash flow1 ~5 ~0.5 to 0
Net financial debt1 ~27 ~33
Special items in EBITDA ~-0.9 ~-14
Core earnings per share1 7.00 to 7.20
6.70 to 6.90

Fx & p adj. = currency- and portfolio-adjusted
1 For definition see Annual Report 2019, A 2.3 “Alternative Performance Measures Used by the Bayer Group.”
2 Financial result before special items
3 (Income taxes + special items in income taxes + tax effects on adjustments) / (core EBIT + financial result + special items in financial result)

 

We now plan to take total currency-adjusted special charges of about €14 billion (previously: about €0.9 billion) in 2020, of which we expect €11.5 billion to pertain to the aforementioned agreements in connection with the legacy Monsanto litigation and about €0.8 billion to be spent on restructuring.

We now expect that payments to resolve litigations will diminish the free cash flow by an amount of €4.5 billion that did not yet feature in our original planning and is to be regarded as extraordinary and nonrecurring. Taking into account the financing of these payments, we now only expect to reduce net financial debt to around €33 billion (previously: to about €27 billion).

Corporate Outlook
The forecast published in February 2020 did not take into account the effects of the COVID-19 pandemic and continues to reflect our targets.

We anticipate that, following the positive start to the year, COVID-19 will continue to impact our business over the course of 2020. It will not be possible to reliably assess the positive and negative effects until later in the year.

We have already identified the key factors that will have a major impact on the development of our business:

// Production and supply
   // Stability of entire supply chain
   // Inventory / safety stock
   // Logistics, also impact on costs

// Demand dynamics
   // Demand patterns, e.g. stockpiling
   // Impact on elective treatments
   // Biofuel demand and seasonal labor
   // Clinical trials and regulatory processes

// Financial markets
   // Debt market access / interest rates
   // Payment behavior of customers and solvency of suppliers
   // FX volatility

// Trends / opportunities
   // Cost management
   // Acceleration of digitalization
   // Role of science in society

Corporate Outlook
The following forecast is based on the current business development and our internal planning. It also proceeds from the assumption that our Animal Health business will transfer to the acquirer effective July 1, 2020, and that we will receive the purchase price on that date in cash and Elanco shares as agreed.

To enhance the comparability of operating performance, the forecasts are adjusted for currency effects1. A 1% appreciation (depreciation) of the euro against all other currencies would decrease (increase) sales on an annual basis by some €350 million and EBITDA before special items by about €100 million.

We adjusted our value flows as of January 1, 2020 (for further details see A 1.1.2 “Corporate Structure”), which has an impact on the divisions’ EBITDA before special items. If these value flows had already applied in 2019, this key indicator would have been as follows:

Pro-forma EBITDA Before Special Items After Value Flow Changes

in Mio. €Crop SciencePharmaceuticalsConsumer Health
EBITDA before special items24,7965,9751,090
Value flow changes(82)(114)51
Pro-forma EBITDA before special items after value flow changes4,7145,8611,141

1 Using the average monthly exchange rates from 2019 (see Annual Report 2019, table B 4/1)
2 For definition see Annual Report 2019, A 2.3 “Alternative Performance Measures Used by the Bayer Group.”

 

For 2020, we expect currency-adjusted sales from continuing operations to amount to around €44 billion to €45 billion. This corresponds to an increase of about 3% to 4% on a currency- and portfolio-adjusted basis. We aim to increase the EBITDA margin before special items to around 28% on a currency-adjusted basis. Based on the aforementioned sales figure, this would correspond to EBITDA before special items of €12.3 billion to €12.6 billion on a currency-adjusted basis. We plan to raise core earnings per share to between €7.00 and €7.20 on a currencyadjusted basis.

Forecast for 2020

2019 figures2020 forecast
€ billionFx & p adj. Change (%)€ billion

Fx & p adj. Change (%)

Sales143.5+ 3.544 to 45+ 3 to 4
Crop Science19.8+ 1.4~+ 4

Pharmaceuticals

18.0+ 5.6+ 3 to 4

Consumer Health

5.5+ 2.6+ 2 to 3
Margin (%)Margin (%)
EBITDA before special items1 (pro forma)11.526.4~28
Crop Science4.8 (4.7)24.2 (23.8)~26

Pharmaceuticals

6.0 (5.9)33.3 (32.6)~33

Consumer Health

1.1 (1.1)20.0 (20.9)22 to 23
Financial result (core)2(1.6)~( 1.5)
Tax rate (core)322.5%~23%
Free cash flow14.2~5
Net financial debt134.1~27
Special items in EBITDA(1.9)~( 0.9)
Core EPS16.407.00 to 7.20

Fx & p adj. = currency- and portfolio-adjusted
1 For definition see Annual Report 2019, A 2.3 “Alternative Performance Measures Used by the Bayer Group.”
2 Financial result before special items
3 (Income taxes + special items in income taxes + tax effects on adjustments) / (core EBIT + financial result + special items in financial result)

 

We plan to take total special charges of about €0.9 billion (currency-adjusted) in 2020, of which we expect approximately €0.7 billion to be spent on restructuring.

Potential estimation risks regarding special charges in connection with litigations are referenced in A 3.2 Opportunity and Risk Report.

Services